Decoding Gig Worker Security: An In-Depth Look at Karnataka’s Ordinance
Authors – Dr.Basavaraju R Shreshta and Mr.Athreya Hebbar
Introduction
The recent Platform-based Gig Workers’ ordinance promulgated by the Government of Karnataka marks a significant policy shift aimed at enhancing the welfare status of the platform-based gig workers by extending social security. Subsequently, the legislation gives rise to a critical question of impact assessment on the future of the platform-based gig economy. This article delves deep to critically analyse the need for regulatory framework in this evolving sector and role of the state on the same. It further evaluates the key provisions of the ordinance, with a special focus on state responsibility and accountability. A comparative assessment is undertaken through the case studies from Spain and California to contextualise Karnataka’s approach within the global framework.
Before delving into the implications of the policy, it is important to trace the evolution of the platform economy, a subset of the gig economy in India. The year 2010 marks the beginning of platform companies gaining traction with the emergence of Uber and Ola in the ride-hailing industry. In the later stages, various other companies such as Swiggy, Zomato, etc continued the campaign of creative destruction in other sectors. They have played a crucial role in problem-solving related to logistics and lastmile connectivity effectively throttling the economy. It is important to note that these companies thrived during a time largely devoid of government regulation signifying the effectiveness of market forces to successfully recognise the problem and develop a model to solve it.
The gig economy is experiencing a rapid expansion globally and in the Indian context, a NITI Ayog report on gig workers estimates the gig workforce to be at a staggering 23.5 million by 2029-30. This burgeoning gig sector has been successful in grabbing the government’s attention and to regulate it through legislation. The first form of legislation came from the centre, enacted in 2020, in the form of ‘Code on Social Security’ classifying the gig workers as a separate section outside the traditional framework of employer-employee relationship and extending the social security measures to the gig workers. In the later stage, state governments have joined the movement and enacted in their respective states positioning Rajasthan and Karnataka as the emerging frontrunners in the policy space.
From an enabler to a regulator
The Karnataka Gig Workers’ ordinance reinforces the government’s role as the ‘regulator’, primarily by establishing a database of gig workers and aggregators through registration on the dedicated state web portal which is accessible to the public. The aggregators are accountable to periodically update any changes in the strength of the workforce. Subsequently, they are mandated to handover the quarterly results of the company to the government within 30 days from the end of the quarter. These regulatory provisions could impose additional administrative and compliance burdens straining the financial and operational sustainability. Through the new draft rules released on 30th of June, aggregators are empowered to not disclose classified information such as access to source code, algorithms, operational logic, system architecture and technical design to the gig workers, upholding the competitiveness of the sector. Further, the government regards itself as the principal driver in making the platform economy a conducive and safe environment for the gig workers.
Addressing state accountability, the ordinance assures the extension of social security measures for gig workers but fails to create a viable framework of schemes it plans to introduce. Despite substantial resources at disposal, lack of a robust action plan limits optimum utilisation of such resources. A well rounded plan of action backed by a needs-based assessment is essential to improve effective welfare delivery.
Cross-country analysis
While performing a cross-country analysis, the reforms taken by the government of Spain and California to regulate the gig economy have generated negative effects. Both governments have decided to reclassify gig workers as employees. However, the case of California is slightly different. There are two different bills namely the California Assembly Bill5(AB5) and Proposition 22 where the latter exempts the app based transportation and delivery companies from the AB5 and provides the status of ‘independent contractors’. Proposition 22 was proposed in light of the negative consequences posed by the AB5. A study by the Mercatus Center shows that for nonexempt occupations, self-employment decreased by 10.5% and the overall employment fell by 4.4%. Furthermore, occupations with greater prevalence of self-employment reported a 17.7% decline in self-employment.
In Spain, the Riders’ Law legally presumes a worker to be an employee and mandates algorithmic transparency. This was met with a mixed response while the platform company Just Eat came into an agreement with trade unions to regulate the conditions of work, others like Uber Eats adopted a sub contracting model, outsourcing rider services to other companies. Although not explicitly expressed as a reason for exit of the platform company Deliveroo, the law would have potentially increased the investment cost hindering the company’s operations in Spain. A study by CEPR argues that with the prevalence of people who prefer casual jobs over regular jobs, the introduction of Riders’ Law will reduce the share of casual employment by 13 percentage points and average wages for casual jobs by 7%. Moreover, the absorption in the regular jobs will be lesser compared to the casual jobs resulting in the reduction of overall welfare due to employment and job losses.
In the light of the aforementioned case studies, the Karnataka ordinance also subtly reflects the drifting of the gig economy toward the traditional employer-employee relationship in the state. The attainment of ‘regulator’ status poses a serious threat to the inherent flexibility offered by the platform companies and further hinders profitability through increased economic burden causing exit or placing cap on employment in retaliation. Subsequently, the ordinance presents certain ambiguities for further innovation in the sector in the future, potentially limiting the development of solutions to the existing societal issues.
Conclusion
In shaping the future of the gig economy, the government has to strike a balance between improving welfare status of the gig workers and nurturing the sector’s growth. Rather than imposing stringent regulations that could inadvertently reclassify gig workers into traditional employment categories, the government should prioritize the development of tailored social security schemes that deliver tangible benefits without overburdening platform companies. There is a strong likelihood that compliance with the present regulatory model can unleash unforeseen effects in a negative direction.
In the capacity of a facilitator, the government needs to encourage a market-friendly regime that promotes efficiency and innovation. Policy alternatives should be explored within the framework of unique dynamics of the platform economy. A collaborative model involving all stakeholders will ensure stability of social security measures, maintain the entrepreneurial nature of the gig economy, and make sure the industry continues to contribute positively to employment, logistics, and the delivery of services in the economy.
(About the authors: Dr Basavaraju R Shreshta is the Executive Director of Grassroots Research And Advocacy Movement, having a deep understanding of Skill Development and Employment ecosystem of Karnataka, having worked at the grassroots and authored policies and vision documents.
Mr Athreya T Hebbar is from Gokhale Institute of Politics and Economics pursuing MSc Economics(Public Policy) and currently interning at GRAAM)
